Around the time the Indo-US nuclear deal was finalised, Prime Minister Manmohan Singh shared a platform with George Bush and declared that the people of India loved George Bush. It was an exaggeration. More likely, he was speaking for himself. Since then, a lot of things have happened, and the Bush presidency is history. More to the point, Manmohan’s tenure is headed that way.

 Set against this larger backdrop, what is remarkable are the striking parallels in the way the Bush presidency shaped up over its two terms, and in the way Manmohan’s stint as prime minister is unravelling now. The Bush tenure ended in comprehensive ignominy and Manmohan Singh is on his way in the same general direction.

 In 2004, George Bush won a hard fought election to get to his second term in office. He won despite a difficult first term where the war in Iraq was widely recognised as a mess. As the man who led America into two costly wars, he also presided over a period of sharp tax cuts for the wealthy that led to the government running up huge deficits. Basically, the wars were financed by piling up the debt. And thus was planted the seeds of the crisis that later blew away his second term. 

 And yet, when you go back to those days, his second term had actually begun quite well. Recall his inauguration speech; he talked expansively about having earned “political capital” and how much he looked forward to spending it. But, a fool and his money are soon parted. A mere seven months into the term, America was hit by a hurricane—Hurricane Katrina—and George Bush took a blow square on the chin. He was never the same president again. The management of the crisis was a disaster. Michael D Brown, the man in charge of FEMA (Federal Emergency Management Agency), was a Bush crony and out of his depth.  The president was seen to be an incompetent executive (“Brownie, you’re doing a heck of a job.”). From this point on, it was all downhill for the Bush presidency.  Indeed, if Bush had failed in his re-election bid, his place in history and his standing among the American people would have been more secure.

 Like Bush, Manmohan’s first term was undistinguished.  Having taken over from the NDA government that in its second half had become one of the most reform-minded governments ever, Manmohan and Sonia interpreted their victory as a rejection by the electorate of the policies identified with economic reform. This would prove to be a huge error of judgement. Because, people do not, as a rule, vote for economic policies; they vote for outcomes. And how you deliver the outcome is not of particular concern to the electorate. In this little piece of insight lies the seeds of the crisis that is now beginning to unfold before us. 

 In order to deliver the outcome to the voters, Manmohan Singh (under relentless prodding from Sonia Gandhi) chose to go resolutely down the populist path—now rebranded as inclusive growth—recklessly expanding entitlements and subsidies, and doling out giveaways like the farm loan waiver. Over the long term, this was never going to be sustainable, and yet it was good enough to win them a re-election. Sufficiently large numbers decided that they liked the outcome and voted for the Congress because people care only for the outcomes and don’t care for the methods, even when it bankrupts the treasury. As far as they are concerned, the only requirement is that the government must keep it coming. As with the wars of choice started by Bush, so it is with these dime a dozen welfare schemes. When the going is good, everyone is for you. When the tide turns, they turn on you like a pack of wolves. 

 It’s the great unwritten rule of prudent economics that delusions begin with euphoria and end with trauma, and that the end happens sooner rather than later. Half way into the second term, the chickens have come home to roost with a vengeance.  

Surprisingly, it all began not with the economy falling apart—mind you, this is also par for the course—but with the damning revelations about sleaze in the conduct of the Commonwealth Games and in the licensing of the 2G spectrum. In terms of the groundswell of public anger, they did to Manmohan Singh what Hurricane Katrina did to George Bush. Manmohan’s very own Katrina moment had come, and nothing would ever be the same again.

Of course, the defining legacy of George Bush was the economic collapse towards the end of his term.  In India too, that is now beginning to play out in serious measure. After seven years of “do nothing” in the matter of economic reforms, the India growth story is on its last legs. GDP growth is slowing down alarmingly, inflation is quite out of control, the Indian currency has depreciated sharply and the fiscal deficit is pushing into the danger zone. Outlines of the dark forces gathering strength and preparing for a sustained assault on the fundamentals of the Indian economy are all too visible.

And so it is that as India heads into an economic crisis of its own, the parallels between George Bush and Manmohan Singh will soon be perfectly in sync. In the final year of his term, sometime in March 2008—before the meltdown, but well after the sub-prime crisis had taken centre stage—Bush claimed that he had presided over 52 consecutive months of job growth. It must be conceded to Bush that he was always a simple man in a complex world. That he should feel pride in an achievement being undone before his very eyes is in keeping with the character of the man. In the same way, Manmohan Singh will take pride in having presided over a period of the fastest GDP growth, but he too will see it all coming unstuck in the stormy days that lie ahead. And that’s why it’s a fair bet that Manmohan Singh will shortly join George W. Bush in regretting the day he won a second term. Like Bush, he was so much better off with only one term.

There is a moral to this tale. Sometimes, the worst that can happen to you is to have too many of your dreams come true.

 

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Ranjan Sreedharan

Ranjan Sreedharan is an independent thinker (and occasional writer) on the economics underlying politics. Not being a professional economist, he believes in evaluating ideas for what they are worth, without waiting for the data (or the macro-economic numbers) to show up. Back in January 2011, he gave a call that India was headed towards an economic crisis and since then has not seen any reason to change his mind. He works in corporate communications and can be contacted at ranjan.sreedharan@gmail.com